Brexit and Intellectual Property

The most important point to impress upon IP owners is that as of today nothing has changed. As has been widely publicised it is likely to be at least two years before any potential changes to IP rights as they apply to the UK occur. If the UK is to officially leave the EU, it has to notify the EU Council of its intention to do so. This triggers Article 50 of the EU Treaty, which provides for a maximum of two years for the withdrawal negotiations (extendable with the agreement of all EU Member States). The notification is very unlikely to occur before October 2016, and as a result, the actual exit, if it happens, is unlikely to occur before October 2018. Until that time, the UK will continue to be an EU Member State, bound by EU treaties and laws. Upon Brexit, any changes to UK IP laws will need to be determined in due course by UK national legislation.

Data Protection

The Information Commissioner’s Office (ICO) released a statement on 19 April 2016 stating that the Data Protection Act 1998 (which is derived from an EU directive) will remain good law post Brexit, and in general terms everything will continue as it is currently for the next 18 months. However, one issue to bear in mind is that in May 2018 the General Data Protection Regulation (GDPR) is set to come into force in all member states of the EU with direct effect. The GDPR provides significantly more stringent rules than exist under the current law.

The UK will have a number of options but considering that the ICO has stressed the importance of having as much consistency in data protection laws on an international basis as possible because so many businesses operate across borders, it is likely that the GDPR will be adopted by the UK particularly if one takes into account that the UK is likely to still be a member of the EU by the time the GDPR comes into force.

Some commentators have posited the suggestion that the UK could use Brexit as an opportunity to amend the 1998 Act and relax the rules for UK businesses in order to give them a competitive advantage over their European counterparts by enabling them to operate with less ‘red tape’. This is unlikely because even if the UK has not negotiated a route into the EEA for example (and if it is in the EEA the GDPR will need to be adopted) UK businesses that trade with EU businesses will ultimately need to comply with the GDPR.

Trade Marks

Brexit will have no impact on national UK trade marks. The EU trade mark (EUTM) rights currently held by owners do continue to exist – they have not fallen away because of the UK’s decision to leave the EU. Even once the UK has left the EU, those rights will continue to exist and UK entities will continue to be entitled to own EUTM’s. The difference will be that they will cover 27 countries instead of 28. EUTM’s would thus effectively shrink in scope, leaving their owners with no legal protection within the United Kingdom unless they also owned UK trademark rights – either via UK trademark registrations or based on use in the United Kingdom.

However, it is anticipated that there will be a mechanism by which EU trade marks can be separated to ensure that coverage in the UK is continued, but quite how or when that will happen remains to be seen. The owners of EUTM’s which are predominantly used in the UK do need to be aware that those rights will become vulnerable to challenge for non-use after five years because any use of the trade mark in the UK, at least after Brexit, will no longer be relevant.

For the moment, owners of EUTM’s can continue to enforce those rights in the UK and they can continue to use the local rights to prevent the registration of a EUTM (because of its unitary character). However post Brexit, this will no longer be possible.

So, the owners of EUTM registrations are unaffected at present but will need to be aware of the possibility of conversion of those rights to cover the UK and take action at the appropriate time. Those planning their filing strategy at present will need to give careful consideration to the filing of separate UK trade marks. We will keep our clients updated on developments of course.

Parallel Imports

Currently, a brand owner cannot object to the further dealing with trade-marked goods it has placed on the market within the EEA (unless there are legitimate reasons to do so), as the trade mark rights in those goods will have been “exhausted”. A brand owner can object to imports into the EEA from outside of the EEA. So if the UK was outside the EEA, EUTM rights could be used to prevent imports into the EU from the UK, as “exhaustion” rules would no longer apply to goods placed on the market in the UK. Depending on what the UK government decides it might be the case that national exhaustion would apply in which case UK rights would not be exhausted by sales in Europe and could be used to prevent parallel imports in to the UK.

Alternatively, UK law might ultimately apply the principle of international exhaustion of trademark rights. If international exhaustion is applied, rights holders would be unable to prevent parallel imports of branded products from outside the UK which they had placed on the market or which had been placed on the market with their consent. UK traders might find that not only is it more difficult to sell goods in the EU but they might not be able to prevent goods they have sold outside the UK being sold back into the territory by a reseller if there is a margin to be made on the sales in the UK.

Designs

UK registered designs will be unaffected. As with trade marks, EU registered designs will cease to have effect in the UK if we leave the EU and, as with trade marks, it is expected that there will be a period for converting EU rights to cover the UK as well. Costs post Brexit will increase if new applicants wished to ensure protection in the EU and the UK because two separate applications would be required.

Note that there is a discrete UK law on unregistered designs which complements the EU system. The whole legal system relating to the protection of designs in the UK was under review recently and the position will need to be re-visited because the EU law on unregistered design right affords protection to aspects of a design which differ from the UK law. There is also a difference in the duration of protection.

So this is an area of law that will change. Owners of registered rights will need to wait and see how the area develops and take action if and when there is a process for conversion of EU rights. Owners of unregistered rights, particularly a UK business relying on Community Unregistered Design, should consider obtaining registration for those rights in due course. Also, anyone seeking new protection should consider seeking separate UK rights.

Patents

The European Patent system under the European Patent Convention (EPC) was set up outside the scope of the EU and EEA and as such European Patents are not affected by Brexit. The term “European Patent” describes patents granted under the EPC. Unlike an EUTM a European Patent is not unitary in character but is rather a collection of independent nationally enforceable patents. The EPC gives the framework for granting a European patent through a single harmonised procedure at the European Patent Office.

By contrast the Unified Patents Court (UPC) project is affected by Brexit because it is not possible for a non-EU state to take part in the proposed regime. The UPC has been in development for a number of years and is the culmination of decades of negotiations for a unified European court with jurisdiction to resolve patent disputes. The location of part of the Court is in London.

The unitary patent – or “European patent with unitary effect” – is a European patent, granted by the EPO under the rules and procedures of the European Patent Convention, to which, upon request of the patent proprietor, unitary effect is given for the territory of the 25 Member States participating in the unitary patent scheme.

The unitary patent will co-exist with national patents and with classical European patents. Patent proprietors will in future be able to choose between various combinations of classical European patents and unitary patents

The UK was one of thirteen signatories required to ratify the instrument and we could still go ahead with it albeit in the knowledge that we would have to leave the system again at a later date as part of an exit package. If the UK does decide to ratify and take part in the system until Brexit then the likely UPC start date of Spring 2017 could still stand. However there has to be doubt as to whether the UK, at least politically, would be prepared to sign up to a system which required us to give primacy to EU law. Similarly it would seem to be unpalatable for the remaining EU member states to have one of the three courts based in London (the Central Division is in Paris with London joining Munich as one of two “sections”).

Copyright

Quite a lot of copyright law and related rights has been the subject of EU harmonisation for some time – with a mixed degree of success. We have EU-derived law such as the Software Directive (2009/24/EC), the Database Directive (96/9/EC) and the Information Society Directive (2001/29/EC) all of which have been incorporated one way or another into UK law. Such UK law will not be affected at least in the short term by Brexit. It is worth noting that the UK has had a number of reviews of its copyright laws over the last ten years or so partly as a result of the challenges of extending copyright to deal with the increasingly digital environment in which the laws operate.

The European Commission has sought to reform and harmonise copyright law across the EU under the Digital Single Market strategy but whilst the ambitious aim of a single EU-wide harmonised copyright law with a single EU-wide Court jurisdiction is at best a long way off, the English Courts have actually been at the forefront of implementing some of the novel remedies made available as a result of the Enforcement Directive. These have made a significant difference in enforcing copyright online – for example the English Courts have enthusiastically supported website blocking injunctions on P2P sites under EU-derived law.

So it is likely that, in terms of copyright UK divergence is unlikely to be too significant. The reality is that in considering any reform, the UK would be likely to take into account changes that the EU makes and possibly adopt those aspects that it sees as successful (and vice versa).

Agreements

Co-existence agreements, licence agreements, software agreements and so on should be reviewed for the term ‘European Union’. An agreement may or may not define what is meant by the ‘EU’ however until now that definition has rarely covered the situation of a member state leaving.

For example, a definition of the EU which states “the countries of the EU from time to time” could well mean that the UK is no longer actually covered by the agreement. It may be that the Court would interpret ‘EU’ to mean that the contract covers countries which were members of the EU at the time the agreement was made. Certainty in a contract is always preferable and it is worthwhile reviewing such contracts now. My partner, Nick Phillips looked into this issue here.

Impact on litigation

One downside of Brexit would be the loss of the UK courts’ ability to grant pan-EU injunctive relief for infringement of Community rights. This would no longer apply in the UK and the UK could find its status as a venue of choice for litigation diminish. Enforcement proceedings against infringements in Europe would also need to be brought separately in the European Union and the UK, increasing the cost of IP enforcement.

The Intellectual Property Rights Enforcement Directive (2004/48/EC) requires all EU countries to apply effective, dissuasive, and proportionate remedies and penalties against those engaged in counterfeiting and piracy, and aims to create a level playing field for right holders in the EU. It means that all EU countries will have a similar set of measures available for right holders to defend their intellectual property rights. It has been incorporated into UK law and has proved a useful tool for Claimants particularly in relation to the recovery of damages for IP rights infringement. In theory the “Enforcement Directive” would no longer be effective in the UK although its provisions have been incorporated into UK law by the Intellectual Property (Enforcement etc.) Regulations 2006 and the UK could choose whether to retain the new and developing case law under the Enforcement Directive.

Comment

The full impact of Brexit will not be fully understood until the terms of the UK’s relationship with the EU have been clarified, and there are a number of options in the event of a Brexit – see my partner David Greene’s comment here. The UK may remain an EEA and EFTA Member State (like Norway and Iceland for example) or at the other end of the spectrum there might be no new negotiated agreements with the EU – instead the UK could comply with the World Trade Organisation’s rules. The latter is unlikely in my view.

Furthermore, the practical impact on IP rights holders will not be felt for a while. Existing Community rights would not cease to apply overnight or without warning. Due to the complexity of the withdrawal process, there would be a transitional period of at least two years which would allow rights holders to optimise their IP protection and enforcement strategies well in advance. Loss of harmonisation and consistency in UK and EU laws may lead to increased legal costs, but this is likely to be a slowly evolving process, giving IP practitioners and rights holders sufficient time to adapt to change before it happens.

Edwin Coe will continue to be able to advise our clients at all times whatever the ultimate result may be. If you have any questions or concerns please do not hestiate to contact, Head of Intellectual Property, Simon Miles or any other members of the Intellectual property team.

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